HTC: CLSA Ups to Buy on ‘One’ Appeal, Rising Prices

By Tiernan Ray

Shares of Taiwan phone maker HTC (2498TW) today rose $11, in New Taiwan dollars, or 3.8%, to close at $301 per share, in Taipei trading, after CLSA Asia-Pacific Markets‘s CK Cheng raised his rating on the shares to Buy from Sell, and raised his price target to $360 from $150, again, in New Taiwan dollars, to reflect an improved outlook for sales and prices based on the recently released “HTC One” smartphone, which will do battle with Apple‘s (AAPL) iPhone and Samsung Electronics‘s (005930KS) Galaxy S4.

Cheng’s note follows a weaker-than-expected Q1 report from HTC on April 8th, which some said was a consequence of delayed availability of the One, a state of affairs Cheng believes has now been remedied:

Our checks suggest the supply chain will ship c.750k HTC One components inApril and around 3.5m units in 2Q13. This is higher than our original estimateof 2.5-3m sales. The better momentum of the HTC One is offset by weaker build for mid-end models and higher opex.

Cheng thinks the One can hold its own against the S4, based on some favorable early reviews — The Wall Street Journal‘s Walt Mossberglast week recommended the One over the S4:

We expect HTC to sell 9-10m HTC One units in 2013, accounting for c.34% of 28m full-year shipments in 2013. This is higher than the 7-8m sales of One X (One’s predecessor) in 2012 which saw its momentum fall sharply from 3Q12 due to lacklustre customer feedback and higher return rates. Our base case scenario still assumes Samsung’s marketing excellence will ensure brisk sales of the Galaxy S4 (~60m units in 2013 vs ~40m Galaxy S3 units in 2012). However, the HTC One’s favourable product reviews and cheaper pricing will help sustain its momentum into 2H13.

Cheng sees average selling price coming in higher than he’d previously thought as a result of the One:

We previously forecasted HTC’s smartphone ASP to decline 10%/7% in 2013/14 to reach US$277/US$257, down from US$308 in 2012 and US$345 in 2011 [...] we now forecast HTC’s blended ASP to stabilise at c.US$320 in 2013-15. This implies premium models such as the One and the Butterfly with ASP over US$400 will account for 35-45% of HTC’s shipments in 2013-15, similar to 2011 and earlier but higher than 25-30% in 2012.

Cheng raised his 2013 estimates to $273.2 billion in revenue and $12.60 per share in EPS (again, in New Taiwan dollars) from a prior $262.4 billion and $7.70.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.